The Chinese Dream, Beijing’s Reforms and Global Realities

For a year, President Xi Jinping and Premier Li Keqiang have talked about the Chinese dream, while outlining massive reforms to pave the way for the realization of the dream. As the Two Sessions took place in Beijing, China’s leaders took a hard look at the challenges ahead. Is the Chinese dream still reachable?

After their hectic first year, China’s leaders are assessing the achievements of the past 12 months in the Two Sessions – of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC), the mainland’s top political advisory body.

As Premier Li Keqiang went through his 32-page Work Report in the Great Hall of the People in Beijing, he addressed the nation’s concerns but set economic growth at 7.5 percent and the inflation target at 3.5 percent. In the former case, the government hopes to ensure adequate employment prospects. In the latter case, the goal is to prepare the further liberalization of energy and resource prices.

In the 1990s, when the booming privatization and globalization drove China’s industrialization, Premier Zhu Rongji delivered his tough messages with a firm face. In the 2000s, when China’s double-digit growth catalyzed the world economy, Premier Wen Jiabao included poetic references in prosaic speeches on economic policy. Now in the 2010s, when China must cope with an increasingly fragile international environment, Premier Li conveys his messages with a down-to-earth style.

Li asks individual Chinese to acknowledge the facts and the trade-offs, and yet to keep their eye on the prize – the Chinese dream.

Massive reforms, balanced approach

During the past year, Premier Li and President Xi Jinping began to push a huge reform agenda of tripartite reforms, core sectors, and packages. The triple reforms comprise the market, government and corporations. In view of the Work Report, the basic approach is now in place.

The goal is recalibrate and reduce the government’s role in the economy. In particular, more private capital will be injected into state-owned enterprise sectors.

Nonetheless, Li called for a “balanced” rather than “prudent” monetary policy. The subtle shift indicates that, in adverse conditions, the government is prepared to loosen credit, if needed. While such moves could ensure a short-term boost to the economy, they could also contribute to added credit challenges of local governments.

Nonetheless, this does not mean that China intends to inject more risk into financial system. Rather, the effort at a “balanced” approach suggests that the government wants to retain its strategic maneuverability.

“We will take investment as the key to maintaining stable economic growth,” Premier Li said. In the medium-term, however, the goal is a gradual shift from investments and net exports to consumption-driven growth.

The core sectors of the ongoing reforms include finance, taxation, state assets, social welfare, land, foreign investment, innovation and good governance. Indeed, China is moving ahead with fiscal reforms, promising to further overhaul the exchange rate, interest rate, and fiscal system.

Further, the government hopes to promote the establishment of small and medium-sized banks by private capital and to set up a bank deposit-insurance system. Similarly, Premier Li pledged that the renmibi’s daily float range will be widened, which has been widely expected in the market after the recent steep yuan depreciation.

These reforms are contested but vital to allow China to end its reliance on the fixed asset investment that still drives growth and has contributed to the volatility in the property markets.

What does it all mean from the standpoint of the Chinese dream?

Toward the Chinese dream

Starting in November 2012, President Xi Jinping began to use the term “Chinese dream” in order to describe the nation’s “national rejuvenation, improvement of people’s livelihoods, prosperity, construction of a better society and military strengthening.”

None of these dreams will come true automatically. Before the Xi-Li era, difficult challenges were tackled with more stimulus, leveraging, and deferred reforms. In the Xi-Li era, complacency is not an option. As a result, the government has opted for no stimulus, deleveraging, and structural reforms.

In the West, the term has often been seen as a kind of a mirror-image of the “American dream.” That, however, is silly. Throughout its history, most Americans have enjoyed far higher living standards than ordinary Chinese. Also, unlike China, the United States did not have to cope with a “century of humiliation.” Different nations have different needs – and different dreams.

The roots of the Chinese dream originate from the history of colonialism, the end of the imperial era and the beginning of the republican era. After the Xinhai Revolution in 1911, Dr Sun Yat-Sen inspired an entire generation with his hopes for the future. Those dreams were influenced by his visits in America, the U.S. progressive movement and particularly Lincoln’s Gettysburg Address – “government of the people, by the people, for the people.”

During those difficult but hopeful years, Sun outlined his “three principles of the people”: a sense of nation-hood, the pursuit of socialist democracy and people’s welfare. In order to survive, grow and prosper among the industrializing West, Sun believed that China would have to be united as a nation, guided by socialism with Chinese characteristics, enjoy economic growth but ensure people’s social welfare.

It is this dream that inspires the long-term efforts of Premier Li and President Xi as well.

If China’s economic development can continue in a peaceful manner, growth could remain around 7 percent in the near term and about 5-6 percent in the medium term. By the early 2020s, China’s economy would surpass that of the U.S. in size.

But what’s far more important, Chinese dream would spread to rising middle classes across the nation.

The original version was published by China.org, China’s authorized government portal on March 10, 2014.

Dr Dan Steinbock is the research director of international business at the India, China and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and EU Center (Singapore). For more, please visit: http://www.differencegroup.net.